Saving for College: Still a Worthwhile Goal

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The old saying that nothing in life is certain except death and taxes left out at least one certainty: the rising cost of a college education.

Even with general inflation relatively tame in recent years, college costs have continued to rise. As a result, the total cost of a single year of education (tuition and fees only) at a four-year, in-state public college now averages $8,655, up 4.8% from a year ago.

Does your child want to attend school out of state? If so, one year's tuition and fees at a four-year college will cost an average of $21,706, up 4.2%. How about a private school? Here, the average cost rises to $29,056, up 4.2%. At a public two-year college, the annual cost drops to $3,131, but this is up 5.8% from a year earlier.*

The good news is that there are more options available today to help you save and invest for college than ever before. These include Section 529 plans, Coverdell Education, Savings Accounts, custodial accounts and even Roth IRAs.

Despite the cost, obtaining a college degree is still a worthwhile goal. A recent study confirmed that college graduates do indeed earn more than those with just a high-school diploma: The median weekly wage for a college graduate with a bachelor's degree or higher is $1,168, but this drops by almost half for a high school graduate–to just $647.** In addition, the unemployment rate for those with at least a bachelor's degree was 4.2% in Feb. 2013, considerably less than the rate for the nation as a whole.

The study revealed that the best college education value is derived from public schools attended by in-state students, which yielded a 9.7% average net annualized return on investment (ROI).*** Conversely, out-of-state public schools offered the least value, yielding an annualized net ROI of just 8.4%. The net annualized ROI for private schools was 9.1%.

The average amount of student loan debt among graduating seniors in 2012 was $27,253, the study reported. By devising a comprehensive education savings plan for your children as soon as possible, you can help ensure that the funds will be there to enable them to attend college when the time comes–and finish school without a crushing student loan debt that will saddle them financially for years after they graduate.

* Source: The College Board, Trends in College Pricing 2013

** Source: U.S. Department of Labor, Bureau of Labor Statistics, 2012

*** ROIs were calculated based on the total cost of college (including tuition and fees, room and board, and books and supplies) and the estimated median pay for that graduate plus four to six years to compensate for time spent in school.

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